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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES AND EXCHANGE ACT OF 1934
For the Fiscal Year Ended Commission File Number 1-1169
December 31, 1996
THE TIMKEN COMPANY
______________________________________________________
(Exact name of registrant as specified in its charter)
Ohio 34-0577130
________________________________________ ___________________
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1835 Dueber Avenue, S.W., Canton, Ohio 44706-2798
________________________________________ ___________________
(Address of principal executive offices) (Zip Code)
Registrants telephone number, including area code (330)438-3000
___________________
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
______________________________ _______________________
Common Stock without par value New York Stock Exchange
Rights to Purchase Common Stock without par value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
YES X NO
___ ___
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ].
2
The aggregate market value of the voting stock held by all shareholders
other than shareholders identified under item 12 of this Form 10-K as of
February 21, 1997, was $1,399,918,752 (representing 26,105,711 shares).
Indicate the number of shares outstanding of each of the issuer's classes
of Common Stock, as of February 21, 1997.
Common Stock without par value --31,173,585 shares (representing a market
value of $1,671,683,496)
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Annual Report to Shareholders for the year ended
December 31, 1996, are incorporated by reference into Parts I and II.
Portions of the proxy statement for the annual meeting of shareholders to
be held on April 15, 1997, are incorporated by reference into parts III
and IV.
Exhibit Index may be found on Pages 20 through 24.
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PART I
______
Item 1. Description of Business
________________________________
General
_______
As used herein the term "Timken" or the "company" refers to The Timken
Company and its subsidiaries unless the context otherwise requires.
Timken, an outgrowth of a business originally founded in 1899, was
incorporated under the laws of Ohio in 1904.
Products
________
Timken's products are divided into two industry segments. The first
includes anti-friction bearings; the second industry segment is steel.
Anti-friction bearings constitute Timken's principal industry product.
Basically, the tapered roller bearing made by Timken is its principal
product in the anti-friction industry segment. It consists of four
components (1) the cone or inner race, (2) the cup or outer race, (3)
the tapered rollers which roll between the cup and cone, and (4) the
cage which serves as a retainer and maintains proper spacing between
the rollers. These four components are manufactured and sold in a wide
variety of configurations and sizes. Matching bearings to service
requirements of customers' applications requires engineering and
oftentimes sophisticated analytical techniques. The design of every
tapered roller bearing made by Timken permits distribution of unit
pressures over the full length of the roller. This fact, coupled with
its tapered design, high precision tolerance, proprietary internal
geometry and premium quality material, provides a bearing with high
load carrying capacity, excellent friction-reducing qualities and long
life.
Timken also produces super precision ball and roller bearings for use in
aerospace, defense, computer disk drives and other markets having high
precision applications. These bearings are mostly produced at the
company's MPB Corporation subsidiary. They utilize ball and straight
rolling elements and are in the super precision end of the general ball
and straight roller bearing product range in the bearing industry. A
majority of MPB's products are special custom-designed bearings and
spindle assemblies. They often involve specialized materials and
coatings for use in applications that subject the bearings to extreme
operating conditions of speed and temperature. During 1996, Timken
announced plans to expand its production capacity for super precision
products through a $5 million investment at its New Philadelphia, Ohio,
plant. The expansion, which is expected to be completed in the second
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Products (cont.)
________________
quarter of 1997, will include advanced equipment to improve production
of precision bearings for machine tool customers and a new cell to
produce customized printing press bearings.
Other bearing products manufactured by Timken include cylindrical
bearings for the rolling mill market. These bearings feature straight
versus tapered rollers. In addition, Timken produces custom-designed
products called SpexxTM performance Bearings. The product line
includes both tapered and cylindrical roller bearings and provides cost-
effective solutions for selective applications.
With the company's 1996 acquisition of Prema Milmet S.A. in Sosnoweic,
Poland, its early 1997 acquisition of Gnutti Carlo S.p.A. in Cogozzo,
Italy, and the company's 1996 Yantai Timken joint venture in China,
Timken has added focus to the production of products used in the
automotive, industrial and agricultural markets in Central Europe
and China.
Steel products include steels of intermediate alloy, low alloy and
carbon grades, vacuum processed alloys, tool steel and other custom-made
steel products including parts made from specialty steel. These are
available in a wide range of solid and tubular sections with a variety
of finishes.
In the third quarter of 1996, Timken announced a $55 million investment
to build a rolling mill and install advanced bar processing equipment at
its Harrison Steel Plant in Canton, Ohio. This investment will position
the company as a cost and quality leader in continuous cast,
intermediate-sized alloy steel bars. The new rolling mill is expected
to be operational by mid-1998.
The company's steel products also include a product line called
Dynametal(TM) Performance Steels. Timken's associates developed this
environmentally friendly replacement for medium carbon leaded steels and
cast iron components. The Steel Business' aggressive move into this
market represents part of its continuing strategy to improve financial
performance by focusing its energies and production on higher-value
engineered steel bars and tubes.
During 1996, Timken strengthened its tool steel distribution and
customer service capabilities by acquiring Ohio Alloy Steels, a tool
steel service center based in Youngstown, Ohio. The company will
function as a subsidiary of Latrobe Steel Company, a Timken Company
subsidiary. Growth of the tool steel distribution business continued
with the acquisition of Houghton & Richards (H&R) in the third quarter.
Based in Marlborough, Massachusetts, H&R expands the scope of products
and services to tool steel customers with a focus on flat products. It
will also operate as a Latrobe Steel subsidiary. A third addition to
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Products (cont.)
________________
Timken's tool steel distribution business was finalized in the fourth
quarter. The company acquired the tool steel finishing and distribution
businesses of Sanderson Kayser Ltd., a United Kingdom steelmaker, from
its British parent GEI International PLC. Now called Sanderson Special
Steels Limited, the operation will function as a Latrobe Steel
subsidiary.
Timken has been increasing the marketing to major customers of high volume,
semifinished components produced from its own steel. This value-
added activity is a growing portion of the business.
The company's Steel Business produces sub-components for automotive
and industrial customers at its St. Clair Precision Tubing
Components Plant in Eaton, Ohio, and its Tryon Peak Plant in
Columbus, North Carolina. The development of the precision parts
business has provided the company with the opportunity to
further expand its market for tubing and capture more higher-value
steel sales. This also enables the company's traditional
tubing customers in the automotive and bearing industries to
take advantage of higher-performing components that cost
less than those they now use.
In the fourth quarter of 1996, Timken announced plans to invest
$30 million in new technology to expand its steel parts manufacturing
capabilities and increase its product lines. Plans include a $15
million profile ring mill, employing proprietary manufacturing processes
and advanced process control technology, to be built at the company's
Tryon Peak Plant in Columbus, North Carolina; and a $15 million hot-
forming facility to be opened in Winchester, Kentucky. These
initiatives extend core competencies and position Timken as a prime
supplier of a variety of shaped rings.
Sales and Distribution
______________________
Timken's products in the bearing industry segment are sold principally
by its own sales organization. A major portion of the shipments are
made directly from Timken's plants and the balance from warehouses
located in a number of cities in the United States, Canada, England,
France, Germany, Mexico and Argentina. These warehouse inventories are
augmented by authorized distributor and jobber inventories throughout
the world which provide local availability when service is required.
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Sales and Distribution (cont.)
______________________________
The company operates an Export Service Center in Atlanta, Georgia, which
specializes in the export of tapered roller bearings for the replacement
markets in the Caribbean, Central and South America and other regions.
Timken's tapered roller bearings are used in general industry and in a
wide variety of products including passenger cars, trucks, railroad cars
and locomotives, machine tools, rolling mills and farm and construction
equipment. MPB's products, which are at the super precision end of the
general ball and straight roller bearing segment, are used in aircraft,
missile guidance systems, computer peripherals and medical instruments.
A significant portion of Timken's steel production is consumed in its
bearing operations. In addition, sales are made to other anti-friction
bearing companies and to the aircraft, automotive and truck,
construction, forging, tooling and oil and gas drilling industries. In
addition, sales are made to steel service centers. Timken's steel
products are sold principally by its own sales organization. Most
orders are custom made to satisfy specific customer applications and are
shipped directly to customers from Timken's steel manufacturing plants.
Timken has a number of customers in the automotive industry including
both manufacturers and suppliers. However, Timken feels that because of
the size of that industry, the diverse applications, and the
fact that its business is spread among a number of customers, both
foreign and domestic, in original equipment manufacturing and
aftermarket distribution, its relationship with the automotive industry
is well diversified.
Timken has entered into individually negotiated contracts with some of
its customers in both the bearing and steel segments. These contracts
may extend for one or more years and, if a price is fixed for any period
extending beyond current shipments, customarily include a commitment by
the customer to purchase a designated percentage of its requirements
from Timken. Contracts extending beyond one year that are not subject
to price adjustment provisions do not represent a material portion of
Timken's sales. Timken does not believe that there is any significant
loss of earnings risk associated with any single contract.
Industry Segments
_________________
Segment information in Note 12 of the Notes to Consolidated Financial
Statements and Information by Industry and Geographic Area on pages 32
and 33 of the Annual Report to Shareholders for the year ended
December 31, 1996, are incorporated herein by reference. Export sales
from the U.S. and Canada are not separately stated since such sales
amount to less than 10% of revenue. The company's Bearing Business has
7
Industry Segments (cont.)
_________________________
historically participated in the worldwide bearing markets while the
Steel Business has concentrated on U.S. markets.
Timken's non-U.S. operations are subject to normal international
business risks not generally applicable to domestic business. These
risks include currency fluctuation, changes in tariff restrictions, and
restrictive regulations by foreign governments including price and
exchange controls.
Competition
___________
Both the anti-friction bearing business and the steel business are
extremely competitive. The principal competitive factors involved, both
in the United States and in foreign markets, include price, product
quality, service, delivery, order lead times and technological
innovation.
Timken manufactures an anti-friction bearing known as the tapered roller
bearing. The tapered principle of bearings made by Timken permits ready
absorption of both radial and axial loads in combination. For this
reason, they are particularly well adapted to reducing friction where
shafts, gears, or wheels are used. Timken also produces super precision
ball and straight roller bearings at its MPB subsidiary. However, since
the invention of the tapered roller bearing by its founder, Timken has
maintained primary focus in its product and process technology on the
tapered roller bearing segment. This has been important to its ability
to remain a leader in the world's bearing industry. This contrasts with
the majority of its major competitors who offer a wider variety of bearing
types such as ball, straight roller, spherical roller and needle for the
general industrial and automotive markets and are, therefore, less
specialized in the tapered roller bearing segment. Timken competes with
domestic manufacturers and many foreign manufacturers of anti-friction
bearings.
The anti-friction bearing business is intensely competitive in every
country in which Timken competes. With the collapse of the former
Soviet Union and the modernization of existing capacity in many
countries, there remain substantial downward pricing pressures in the
United States and other countries even during periods of significant
demand in these markets. Moreover, international price discrimination
by certain of Timken's foreign competitors and the continued
absorption of antidumping duties by companies related to the
foreign producers in the United States create additional pricing
pressures in the United States. Imports of tapered roller bearings into
8
Competition (cont.)
___________________
the United States in 1996 were $220 million, or approximately 17 percent
of the domestic tapered roller bearing market. In addition, Timken
estimates the tapered roller bearings contained as components of foreign
automobiles and heavy equipment produced outside the United States and
imported into this country, to be approximately $185 million in 1996.
To address the problem of injurious dumping by various foreign
competitors, the company has pursued its legal rights in the United
States and in other parts of the world for many years. In the United
States, antidumping orders are outstanding from cases brought by the
company in the early 1970s and in 1986. The antidumping finding issued
in 1976 pertains to tapered roller bearings from Japan that have an
outside diameter of 4 inches or less, but excluding unfinished components
or parts. The finding does not apply to one major Japanese producer.
In August 1986, the company filed an antidumping petition on behalf of
the U.S. tapered roller bearing industry with both the U.S.
International Trade Commission and the U.S. Department of Commerce
alleging that imports of tapered roller bearings (including unfinished
parts and components from six countries (China, Romania, Yugoslavia,
Italy, Hungary and Japan (to the extent not covered by the 1976
finding)) were being sold at less than fair value in the United States
and were causing material injury to the domestic industry. The U.S.
Department of Commerce found that product from each of the countries was
being sold in the United States at less than fair value, or "dumped," and
the U.S. International Trade Commission found such imports were causing
injury to the domestic industry. The Commerce Department's notice also
identified the amount by which selling prices of the foreign producers
were less than fair value. This amount is expressed as a weighted
average percentage for each company investigated and is often referred
to as the "final margin" for a particular time period. The final
margins for Japanese producers as originally calculated in 1986-87 were
approximately 36 percent for the major producers. Final margins for
producers in other countries varied but were above 100% for one foreign
producer. If requested by foreign producers, importers, or domestic
producers, the dumping margins (if any) will be examined for a more
recent time period.
Substantial dumping margins have been found for most or all of the major
producers in Japan for most years since the antidumping orders were
issued. On March 6, 1997, the U.S. Department of Commerce issued final
margins for companies investigated for the 1994-95 time period, finding
a dumping margin for the major producer examined of over 21 percent.
Margins for certain resellers/exporters were as high as 47 percent.
Significant dumping margins continue to be found for certain producers
from other countries covered by orders. For some countries covered by
9
Competition (cont.)
___________________
the orders, imports have declined or ceased. Some foreign producers and
exporters / resellers have ceased dumping. The orders were revoked for
Yugoslavia in 1995 and for Italy in 1996 as well as for selected
individual producers in the other orders over time. Importers
are required to post a cash deposit with the U.S. Customs Service equal
to the final margin from the most recent period that has been published
for a particular foreign producer from a country where an order remains
outstanding. If no dumping is found or the amount of dumping is less
than the cash deposit, the importer receives a refund with interest. If
the dumping found in the review is greater than the amount posted as a
cash deposit, the difference must be paid to the U.S. Customs Service
with interest.
Timken has remained deeply concerned about the persistence of unfair
trade practices in its major markets and has participated in the
administrative review process in the United States and elsewhere to
assure that conditions of fair trade are restored, if possible. The
company has pursued and continues to pursue legislative changes to
neutralize the price depressing effect of duty absorption that has
continued in the United States for more than 20 years in some cases.
The existence of the orders reduces the commercial harm that would
otherwise be experienced by the company from the continued dumping
practices of certain foreign competitors.
Timken manufactures carbon and alloy seamless tubing, carbon and alloy
steel solid bars, tool steels and other custom-made specialty steel
products. Specialty steels are characterized by special chemistry,
tightly controlled melting and precise processing.
Maintaining high standards of product quality and reliability while
keeping production costs competitive is essential to Timken's ability to
compete in the specialty steel industry with domestic and foreign steel
manufacturers.
In May 1993, the U.S. Department of Commerce determined that Brazilian
steel was being dumped in the U.S. market at prices up to 27% below fair
value. This government action was in response to an anti-dumping
petition filed in 1992 by the company and Republic Engineered Steel,
Inc. In July 1993, the International Trade Commission (ITC) ruled that
domestic producers of special quality finished hot-rolled steel bars
were not being injured by imports from Brazil. The company and Republic
appealed this ruling during the third quarter of 1993 to the U.S. Court
of International Trade in New York. In early 1996, the Court issued a
decision affirming the determination of the ITC. No further appeals
were taken.
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Backlog
_______
The backlog of orders of Timken's domestic and overseas operations is
estimated to have been $1.05 billion at December 31, 1996, and $1
billion at December 31, 1995. Actual shipments are dependent upon ever-
changing production schedules of the customer. Accordingly, Timken does
not believe that its backlog data and comparisons thereof as of
different dates are reliable indicators of future sales or shipments.
Raw Materials
_____________
The principal raw materials used by Timken in its North American plants
to manufacture bearings are its own steel tubing and bars and purchased
strip steel. Outside North America, the company purchases raw materials
from local sources with whom it has worked closely to assure steel
quality according to its demanding specifications.
The principal raw materials used by Timken in steel manufacturing are
scrap metal, nickel and other alloys. Timken believes that the
availability of raw materials and alloys are adequate for its needs,
and, in general, it is not dependent on any single source of supply.
Research
________
Timken's major research center, located in Stark County, Ohio near its
largest manufacturing plant, is engaged in research on bearings, steels,
manufacturing methods and related matters. Research facilities are also
located at the MPB New Hampshire Plants, the Duston, England plant and
at the Latrobe, Pennsylvania plant. Expenditures for research,
development and testing amounted to approximately $41,000,000 in 1996,
$35,000,000 in 1995 and $36,000,000 in 1994. The company's research
program is committed to the development of new and improved bearing and
steel products, as well as more efficient manufacturing processes and
techniques and the expansion of application of existing products.
Environmental Matters
_____________________
The company continues to focus on protecting the environment and
complying with environmental protection laws. In doing so, the company
has invested in pollution control equipment and updated plant
operational practices. The company believes it has established adequate
reserves to cover its environmental expenses. The company has a well-
established environmental compliance audit program which was recently
expanded to include international locations.
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Environmental Issues (cont.)
____________________________
It is difficult to assess the possible effect of compliance with future
requirements that differ from existing ones. As previously reported,
the company is uncertain whether additional emission monitoring will be
required or what the cost will be when proposed emission monitoring
regulations pursuant to the Clean Air Act of 1990 are issued. The
company is also unsure of the ultimate future financial impact to the
company that could result if the United States Environmental Protection
Agency's (EPA) proposed rules to tighten the National Ambient Air
Quality Standards for fine particulate and ozone are issued without
change. These proposals could prove damaging to all manufacturing
industries.
The company and certain of its U.S. subsidiaries have been designated
as potentially responsible parties (PRPs) by the United States EPA for
site investigation and remediation at certain sites under the
Comprehensive Environmental Response, Compensation and Liability Act
(Superfund). Such designations are made regardless of the company's
limited involvement at each site. The claims for remediation have been
asserted against numerous other entities, which are believed to be
financially solvent and are expected to fulfill their proportionate
share of the obligation. In 1996, the company and its Latrobe Steel
subsidiary received two additional notifications from the EPA and
the company has been named a PRP at a site, but Latrobe has not, as
yet. Management believes any ultimate liability with respect to all
pending actions will not materially affect the company's operations,
cash flows or consolidated financial position.
The company's MPB Corporation subsidiary completed installation of the
second of two environmental projects at its manufacturing locations in
New Hampshire. The company had provided for the costs of these
projects, which to date have been $3 million, recognizing a portion of
these costs are being recovered from a former owner of the property.
Future operating and maintenance costs are expected to be $2.2 million.
MPB also filed suit against its insurance companies for reimbursement
of clean-up costs. Settlements have been reached with two insurers and
suits remain outstanding against two companies. The full extent of
reimbursement cannot be estimated.
The company continued work in 1996 on an environmental project at its
Canton, Ohio, location and started one at the company's Columbus, Ohio,
location. Costs for these projects are estimated to be about
$1.25 million each.
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Patents, Trademarks and Licenses
________________________________
Timken owns a number of United States and foreign patents, trademarks
and licenses relating to certain of its products. While Timken regards
these as items of importance, it does not deem its business as a whole,
or either industry segment, to be materially dependent upon any one
item or group of items.
Employment
__________
At December 31, 1996, Timken had 19,130 associates. Approximately
thirty-five percent of Timken's U.S. associates are covered under a
collective bargaining agreement that expires within one year.
The company's contract with the United Steelworkers covering a portion
of its U. S. workforce expires on September 22, 1997. The company's
revenues and income could be materially reduced if a new agreement
is not reached sufficiently early.
Executive Officers of the Registrant
____________________________________
The officers are elected by the Board of Directors normally for a term
of one year and until the election of their successors. All officers
have been employed by Timken or by a subsidiary of the company during
the past five-year period. The Executive Officers of the company as of
February 21, 1997, are as follows:
Current Position and Previous
Name Age Positions During Last Five Years
____ ___ ____________________________________________
W. R. Timken, Jr. 58 1991 Chairman - Board of Directors;
Director; Officer since 1968.
J. F. Toot, Jr. 61 1991 President;
1992 President and Chief Executive Officer;
Director; Officer since 1967.
R. L. Leibensperger 58 1991 Vice President - Technology;
1995 Executive Vice President and President
- Bearings; Officer since 1986.
B. J. Bowling 55 1991 Vice President - Human Resources and
Logistics;
1993 Executive Vice President-Latrobe Steel
Company;
1995 President-Latrobe Steel Company;
1996 Executive Vice President and President
- Steel; Officer since 1996.
L. R. Brown 61 1991 Vice President and General Counsel;
Secretary; Officer since 1990.
13
Current Position and Previous
Name Age Positions During Last Five Years
____ ___ ____________________________________________
J. T. Elasser 44 1991 Director-President-Timken do Brasil;
1991 Director-21st Century Business
Project;
1993 Deputy Managing Director-Bearings-
Europe, Africa and West Asia;
1995 Managing Director-Bearings-Europe,
Africa and West Asia;
1996 Vice President-Bearings-Europe, Africa
and West Asia; Officer since 1996.
J. W. Griffith 43 1991 Director-Purchasing and Logistics;
1993 Director-Manufacturing-Bearings-North
and South America;
1993 Vice President-Manufacturing-Bearings-
North America;
1996 Vice President-Bearings-North American
Automotive, Rail, Asia Pacific and
Latin America; Officer since 1996.
G. E. Little 53 1991 Director Finance and Assistant
Treasurer;
1991 Treasurer;
1992 Vice President - Finance; Treasurer;
Officer since 1990.
S. J. Miraglia, Jr. 46 1991 Director-Manufacturing-Steel;
1993 Vice President-Manufacturing-Steel;
1994 Director-Manufacturing-Europe, Africa
and West Asia;
1996 Vice President-Bearings-North American
Industrial and Super Precision;
Officer since 1996.
S. A. Perry 51 1991 Director - Purchasing and Logistics;
1993 Vice President - Human Resources and
Logistics; Officer since 1993.
J. J. Schubach 60 1991 Vice President - Strategic Management;
1996 Vice President - Strategic Management
and Continuous Improvement; Officer
since 1984.
T. W. Strouble 58 1991 Director - Manufacturing - Bearings
North and South America;
1992 Director - Marketing - Bearings -
North and South America;
1993 Vice President - Sales and Marketing -
Bearings - North and South America;
1995 Vice President - Technology;
Officer since 1995.
14
Current Position and Previous
Name Age Positions During Last Five Years
____ ___ ____________________________________________
W. J. Timken 54 1991 Director - Human Resource Development;
1992 Vice President; Director; Officer
since 1992.
Item 2. Properties
___________________
Timken has bearing and steel manufacturing facilities at several
locations in the United States. Timken also has bearing manufacturing
facilities in several countries outside the United States. The
aggregate floor area of these facilities worldwide is approximately
13,004,000 square feet, all of which, except for approximately 547,000
square feet, is owned in fee. The buildings occupied by Timken are
principally of brick, steel, reinforced concrete and concrete block
construction, all of which are suitably equipped and in satisfactory
operating condition.
Timken's bearing manufacturing facilities in the United States are
located in Ashland, Bucyrus, Canton, Columbus and New Philadelphia,
Ohio; Altavista and Richmond, Virginia; Asheboro and Lincolnton, North
Carolina; Carlyle, Illinois; Gaffney, South Carolina; Keene and Lebanon,
New Hampshire; Knoxville, Tennessee; Lenexa, Kansas; North Little Rock,
Arkansas; and Ogden, Utah. These facilities, including the research
facility in Canton, Ohio, and warehouses at plant locations, have an
aggregate floor area of approximately 4,629,000 square feet.
Timken's bearing manufacturing plants outside the United States are
located in Ballarat, Australia; Benoni, South Africa; Cogozzo, Italy;
Colmar, France; Duston, England; Medemblik, The Netherlands; Sao Paulo,
Brazil; Singapore; Sosnowiec, Poland; St. Thomas, Canada; and Yantai,
China. The facilities, including warehouses at plant locations, have an
aggregate floor area of approximately 3,016,000 square feet.
Timken's steel manufacturing facilities in the United States are located
in Canton, Eaton, Wauseon and Wooster, Ohio; Columbus, North Carolina;
and Franklin and Latrobe, Pennsylvania. These facilities have an
aggregate floor area of approximately 5,102,000 square feet.
Timken also has a tool steel finishing and distribution facility in
Sheffield, England. This facility has an aggregate floor area of
approximately 257,000 square feet.
In addition to the manufacturing and distribution facilities discussed
above, Timken owns warehouses and steel distribution facilities in the
United States, Canada, England, France, Scotland, Germany, Mexico and
Argentina, and leases several relatively small warehouse facilities in
cities throughout the world.
15
Properties (cont.)
__________________
The company is a forty percent shareholder in Tata Timken Limited, a
joint venture with The Tata Iron and Steel Company Limited. The joint
venture consists of a manufacturing facility in Jamshedpur, India,
completed in March of 1992, and four sales offices, also located in
India.
During 1996, Timken's Bearing and Steel Businesses continued to
experience high plant utilization as a result of increased sales in
most industries and geographic areas.
Timken's properties expanded significantly during 1996 and early 1997 as
a result of its five most recent acquisitions and its joint venture in
China. The company also announced plans for plant expansions in several
of its U.S. plants.
In the first quarter of 1996, Timken acquired the bearing assets of FLT
Prema Milmet S.A. in Sosnowiec, Poland. This subsidiary is now Timken
Polska Sp.z.o.o. and serves mainly the automotive, agricultural and
industrial machinery markets in Central Europe. The facility includes
floor space of approximately 835,000 square feet and employs some 800
associates.
In March, Timken joined with Yantai Bearing Factory to form the Yantai
Timken joint venture. Located in Shandong Province near the Yellow
Sea, Yantai Timken Company Limited serves mainly the Chinese automotive
and agricultural markets. The Timken Company owns 60% of the joint
venture. This facility consists of 484,000 square feet of
manufacturing space and employs about 1,400 people.
During the second quarter, Timken acquired Ohio Alloy Steels
Corporation, a tool steel service center based in Youngstown, Ohio.
The company employs about 70 people and will function as a subsidiary
of Latrobe Steel Company, a Timken Company subsidiary.
Growth of the tool steel distribution business continued with the
acquisition of Houghton & Richards Corporation (H & R) in the third
quarter. Headquartered in Marlborough, Massachusetts, H & R serves
customers from a wide base of facilities in White House, Tennessee;
Northborough, Massachusetts; Walton Hills, Ohio, Forest Park, Illinois;
and Greenville, South Carolina. The company employs about 80 people
and also will operate as a Latrobe Steel subsidiary.
In the fourth quarter, Timken finalized its acquisition of the tool
steel finishing and distribution businesses of Sanderson Kayser Ltd., a
United Kingdom steelmaker, from its British parent GEI International
PLC. Now called Sanderson Special Steels Limited, the operation
contains 257,000 square feet of manufacturing and plant warehouse space
at its tool steel finishing operations in Sheffield, England, in
addition to steel distribution sites in Birmingham, London and Wigan,
England; and Glasgow, Scotland. Sanderson Special Steels employs 145
people and will function as a Latrobe Steel subsidiary.
16
Properties (cont.)
__________________
The company announced in the third quarter a $5 million investment in
its New Philadelphia Precision Tapered Bearing Business to meet
continuing high demand for its precision products. The expansion will
increase the plant's floor space by 14,000 square feet and production
capacity by 50 percent and is expected to be completed in the second
quarter of 1997.
Also in the third quarter, Timken announced plans to expand its
Canton, Ohio Harrison Steel Plant to house a new rolling mill and bar
processing equipment. The expansion, which is expected to be fully
operational by mid-1998, will result in about 119,000 square feet of
additional manufacturing space.
In February 1997, Timken announced plans to open a hot-forming facility
in Winchester, Kentucky. The Winchester Plant will be a 75,000 square
foot facility and will initially employ 30 people. The plant will begin
producing forged bearing components from Timken steel bars in May 1997.
In February 1997, Timken completed the acquisition of the tapered
roller bearing business of Gnutti Carlo S.p.A., a leading European
manufacturer located near Brescia in northern Italy. This acquisition
resulted in a 163,300 square foot increase in Timken's manufacturing
space and will strengthen the company's European presence and promote
continuing synergies among the company's other plants in Europe. This
facility employs about 120 people.
Item 3. Legal Proceedings
__________________________
The company is currently involved in negotiations with the Ohio Attorney
General's office regarding alleged violations of the company's NPDES
water discharge permits at its Canton, Ohio, location. The company
believes it has substantial defenses to the violations alleged by the
Attorney General, and that the matter will ultimately be settled for an
amount that will not be material to its financial condition or results
of operations.
In August 1994, the company's Latrobe Steel Company subsidiary was
served with a complaint filed by seven former employees in the U. S.
District Court, Western District of Pennsylvania. Each of the
employees had been terminated from employment in late 1993 as part of
the company's administrative streamlining efforts. The plaintiffs'
17
Item 3. Legal Proceedings (cont.)
_________________________________
original claims of wrongful termination in violation of public policy,
breach of contract and promissory estoppel were dismissed. The relief
requested includes reinstatement, back pay, front pay, liquidated
damages, attorneys' fees and compensatory and punitive damages under the
Americans With Disabilities Act and Pennsylvania law. In December 1996,
the company settled all claims for an amount not material to its
financial condition or results of operations.
Item 4. Submission of Matters to a Vote of Security Holders
____________________________________________________________
No matters were submitted to a vote of security holders during the
fourth quarter ended December 31, 1996.
18
PART II
_______
Item 5. Market for the Registrant's Common Equity and Related Stock
____________________________________________________________________
Holder Matters
______________
The company's common stock is traded on the New York Stock Exchange
(TKR). The number of record holders of the company's common stock
at December 31, 1996, was 9,606. The estimated number of shareholders
at December 31, 1996 was 31,813.
High and low stock prices and dividends for the last two years are
presented in the Quarterly Financial Data schedule on Page 1 of the
Annual Report to Shareholders for the year ended December 31, 1996, and
is incorporated herein by reference.
Item 6. Selected Financial Data
________________________________
The Summary of Operations and Other Comparative Data on Pages 34 and 35
of the Annual Report to Shareholders for the year ended December 31,
1996, is incorporated herein by reference.
Item 7. Management's Discussion and Analysis of Financial Condition and
________________________________________________________________________
Results of Operation
____________________
Management's Discussion and Analysis of Financial Condition and Results
of Operations on Pages 17-24 of the Annual Report to Shareholders for
the year ended December 31, 1996, is incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data
____________________________________________________
The Quarterly Financial Data schedule included on Page 1, the
consolidated financial statements of the registrant and its subsidiaries
on Pages 18-24, the notes to consolidated financial statements on Pages
25-33, and the Report of Independent Auditors on Page 33 of the Annual
Report to Shareholders for the year ended December 31, 1996, are
incorporated herein by reference.
Item 9. Changes in and Disagreements with Accountants
______________________________________________________
on Accounting and Financial Disclosure
______________________________________
Not applicable.
19
PART III
________
Item 10. Directors and Executive Officers of the Registrant
____________________________________________________________
Required information is set forth under the caption "Election of
Directors" on Pages 4-7 of the proxy statement issued in connection with
the annual meeting of shareholders to be held April 15, 1997, and is
incorporated herein by reference. Information regarding the executive
officers of the registrant is included in Part I hereof.
Item 11. Executive Compensation
________________________________
Required information is set forth under the caption "Executive
Compensation" on Pages 10-19 of the proxy statement issued in connection
with the annual meeting of shareholders to be held April 15, 1997, and
is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
________________________________________________________________________
Required information regarding Security Ownership of Certain Beneficial
Owners and Management, including institutional investors owning more
than 5% of the company's Common Stock, is set forth under the caption
"Beneficial Ownership of Common Stock" on Pages 8-9 of the proxy
statement issued in connection with the annual meeting of shareholders
to be held April 15, 1997, and is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
________________________________________________________
Required information is set forth under the caption "Election of
Directors" on Pages 4-7 of the proxy statement issued in connection with
the annual meeting of shareholders to be held April 15, 1997, and is
incorporated herein by reference.
20
PART IV
_______
Item 14. Exhibits, Financial Statement Schedules, and Report on
Form 8-K
_________________________________________________________________________
(a)(1) and (2) - The response to this portion of Item 14 is submitted
as a separate section of this report.
(3) Listing of Exhibits
Exhibit
_______
(3)(i) Amended Articles of Incorporation of The Timken Company
(Effective April 16, 1996) were filed with Form S-8
dated April 16, 1996 and are incorporated herein by
reference.
(3)(ii) Amended Regulations of The Timken Company effective
April 21, 1987, were filed with Form 10-K for the
period ended December 31, 1992, and are incorporated
herein by reference.
(4) Fifth Amendment Agreement dated August 31, 1996, to the
amended and restated credit agreement as amended
February 23, 1993, May 31, 1994, November 15, 1994, and
August 15, 1995, between Timken and certain banks was
filed with Form 10-Q for the period ended September 30,
1996, and is incorporated herein by reference.
(4.1) Fourth Amended Agreement dated August 15, 1995, to the
amended and restated credit agreement as amended
February 23, 1993, May 31,1994, and November 15, 1994,
between Timken and certain banks, was filed with Form
10-Q for the period ended September 30, 1995, and is
incorporated herein by reference.
(4.2) Third Amendment Agreement dated November 15, 1994, to
the amended restated credit agreement as amended
February 23, 1993, and May 31, 1994, between Timken and
certain banks, was filed with Form 10-Q for the period
ended September 30, 1995, and is incorporated herein by
reference.
21
Listing of Exhibits (cont.)
___________________________
(4.3) Second Amendment Agreement dated May 31, 1994, to the
amended restated credit agreement as amended February
23, 1993, between Timken and certain banks, was filed
with Form 10-Q for the period ended June 30, 1994, and
is incorporated herein by reference.
(4.4) First Amendment Agreement dated February 26, 1993, to
the restated credit agreement as amended December 31,
1991, between Timken and certain banks was filed with
Form 10-K for the period ended December 31, 1992, and
is incorporated herein by reference.
(4.5) Credit Agreement amended as of December 31, 1991,
between Timken and certain banks was filed with Form
10-K for the period ended December 31, 1991, and is
incorporated herein by reference.
(4.6) Indenture dated as of July 1, 1990, between Timken and
Ameritrust Company of New York, which was filed with
Timken's Form S-3 registration statement dated July 12,
1990, and is incorporated herein by reference.
(4.7) First Supplemental Indenture, dated as of July 24,
1996, by and between The Timken Company and Mellon
Bank, N.A. was filed with Form 10-Q for the period
ended September 30, 1996, and is incorporated herein by
reference.
(4.8) The company is also a party to agreements with respect
to other long-term debt in total amount less than 10%
of the registrant's consolidated total assets. The
registrant agrees to furnish a copy of such agreements
upon request.
Management Contracts and Compensation Plans
___________________________________________
(10) The Management Performance Plan of The Timken Company
for Officers and Certain Management Personnel was filed
with Form 10-K for the period ended December 31, 1995,
and is incorporated herein by reference.
(10.1) The form of Deferred Compensation Agreement entered
into with Joseph F. Toot, Jr. and W. R. Timken, Jr.,
was filed with Form 10-Q for the period ended
September 30, 1995, and is incorporated herein by
reference.
22
Listing of Exhibits (cont.)
___________________________
(10.2) The Timken Company 1996 Deferred Compensation Plan for
officers and other key employees, was filed with Form
10-Q for the period ended September 30, 1995, and is
incorporated herein by reference.
(10.3) The Timken Company Long-Term Incentive Plan for
officers and other key employees as amended and
restated as of December 20, 1995, and approved by
shareholders April 16, 1996, was filed as Appendix A to
Proxy Statement dated March 6, 1996, and is
incorporated herein by reference.
(10.4) The 1985 Incentive Plan of The Timken Company for
Officers and other key employees as amended through
April 16, 1991, was filed with Form 10-K for the period
ended December 31, 1991, and is incorporated herein by
reference.
(10.5) The form of Severance Agreement entered into with all
Executive Officers of the company. Each differs
only as to name and date executed.
(10.6) The form of Death Benefit Agreement entered into with
all Executive Officers of the company was filed with
Form 10-K for the period ended December 31, 1993, and
is incorporated herein by reference. Each differs only
as to name and date executed.
(10.7) The form of Indemnification Agreements entered into
with all Directors who are not Executive Officers of
the company was filed with Form 10-K for the period
ended December 31, 1990, and is incorporated herein by
reference. Each differs only as to name and date
executed.
(10.8) The form of Indemnification Agreements entered into
with all Executive Officers of the company who are not
Directors of the company was filed with Form 10-K for
the period ended December 31, 1990 and is incorporated
herein by reference. Each differs only as to name and
date executed.
23
Listing of Exhibits (cont.)
___________________________
(10.9) The form of Indemnification Agreements entered into
with all Executive Officers of the company who are also
Directors of the company was filed with Form 10-K for
the period ended December 31, 1990 and is incorporated
herein by reference. Each differs only as to name and
date executed.
(10.10) The form of Employee Excess Benefits Agreement entered
into with all active Executive Officers, certain
retired Executive Officers, and certain other key
employees of the company was filed with Form 10-K for
the period ended December 31, 1991 and is incorporated
herein by reference. Each differs only as to name and
date executed, except Mr. Brown who will be given
additional service.
(10.11) The Amended and Restated Supplemental Pension Plan of
The Timken Company was filed with Form 10-K for the
period ended December 31, 1995, and is incorporated
herein by reference.
(10.12) Amendment No. 1 to the Amended and Restated
Supplemental Pension Plan of The Timken Company was
filed with Form 10-K for the period ended December 31,
1995, and is incorporated herein by reference.
(10.13) The form of The Timken Company Nonqualified Stock
Option Agreement for nontransferable options as adopted
on April 16, 1996, was filed with Form 10-Q for the
period ended March 31, 1996, and is incorporated herein
by reference.
(10.14) The form of The Timken Company Nonqualified Stock
Option Agreement for transferable options as adopted on
April 16, 1996, was filed with Form 10-Q for the period
ended March 31, 1996, and is incorporated herein by
reference.
(11) Computation of Per Share Earnings.
(13) Annual Report to Shareholders for the year ended
December 31, 1996, (only to the extent expressly
incorporated herein by reference).
(21) A list of subsidiaries of the registrant.
(23) Consent of Independent Auditors.
24
Listing of Exhibits (cont.)
___________________________
(24) Power of Attorney
(27) Article 5
(b) Reports on Form 8-K:
None.
(c) The exhibits are contained in a separate section of this report.
25
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the company has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
THE TIMKEN COMPANY
By /s/ Joseph F. Toot, Jr. By /s/ G. E. Little
________________________________ _____________________________
Joseph F. Toot, Jr., Director; G. E. Little
President and Chief Executive Vice President - Finance
Officer (Principal Financial and
Accounting Officer)
Date March 27, 1997 Date March 27, 1997
________________________________ _____________________________
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed by the following persons on behalf of the registrant
and in the capacities and on the dates indicated.
By /s/ Robert Anderson* By /s/ John M. Timken, Jr.*
______________________________ ________________________________
Robert Anderson Director John M. Timken, Jr. Director
Date March 27, 1997 Date March 27, 1997
______________________________ _______________________________
By /s/ Martin D. Walker* By /s/ W. J. Timken*
______________________________ _______________________________
Martin D. Walker Director W. J. Timken Director
Date March 27, 1997 Date March 27, 1997
______________________________ _______________________________
By /s/ Stanley C. Gault* By /s/ W. R. Timken, Jr.*
______________________________ _______________________________
Stanley C. Gault Director W. R. Timken, Jr. Director
Chairman - Board of Directors
Date March 27, 1997 Date March 27, 1997
______________________________ _______________________________
By /s/ J. Clayburn La Force, Jr.* By /s/ Charles H. West*
______________________________ _______________________________
J. Clayburn La Force, Jr. Director Charles H. West Director
Date March 27, 1997 Date March 27, 1997
______________________________ _______________________________
26
By /s/ Robert W. Mahoney* By /s/ Alton W. Whitehouse*
______________________________ _______________________________
Robert W. Mahoney Director Alton W. Whitehouse Director
Date March 27, 1997 Date March 27, 1997
______________________________ _______________________________
By /s/ Jay A. Precourt*
______________________________ By: /s/ G. E. Little
Jay A. Precourt Director ______________________________
Date March 27, 1997 G. E. Little,attorney-in-fact
______________________________ by authority of Power of
Attorney filed as Exhibit 24
hereto